The Gap, Inc. (GAP)

Cash conversion cycle

		Feb 1, 2025	Nov 2, 2024	Aug 3, 2024	May 4, 2024	Feb 3, 2024	Oct 28, 2023	Jul 29, 2023	Apr 29, 2023	Jan 28, 2023	Oct 29, 2022	Jul 30, 2022	Apr 30, 2022	Jan 29, 2022	Oct 30, 2021	Jul 31, 2021	May 1, 2021	Jan 30, 2021	Oct 31, 2020	Aug 1, 2020	May 2, 2020
Days of inventory on hand (DOH)	days	85.16	95.08	85.78	78.79	79.90	93.22	84.41	84.44	85.01	106.39	112.27	115.06	109.79	101.48	84.28	89.95	98.36	107.36	87.02	83.19
Days of sales outstanding (DSO)	days	7.28	—	—	—	7.08	—	—	—	7.95	—	—	—	8.74	—	—	—	9.60	—	—	—
Number of days of payables	days	61.31	62.13	61.97	48.27	54.03	56.20	53.31	44.04	46.97	48.53	58.73	58.06	70.98	60.79	58.49	58.07	69.95	89.27	63.23	36.44
Cash conversion cycle	days	31.14	32.96	23.82	30.51	32.96	37.02	31.09	40.40	45.99	57.86	53.54	57.00	47.55	40.69	25.79	31.88	38.01	18.10	23.79	46.76

February 1, 2025 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 85.16 + 7.28 – 61.31
= 31.14

The cash conversion cycle of The Gap, Inc. measures the time it takes for the company to convert its investments in inventory and other resources into cash flows from sales. A shorter cash conversion cycle indicates a more efficient use of resources and quicker conversion of sales into cash.

Analyzing the data provided, we observe fluctuations in The Gap's cash conversion cycle over the periods outlined. For instance, the cycle decreased from 46.76 days on May 2, 2020, to a low of 18.10 days on October 31, 2020, indicating an improvement in the company's efficiency in managing its working capital during that period.

However, the cash conversion cycle increased to 57.00 days on April 30, 2022, before decreasing to the range of 30-40 days until November 2, 2024. The latest available data as of February 1, 2025, shows the cycle at 31.14 days.

It is crucial for The Gap to monitor its cash conversion cycle closely as a prolonged cycle may indicate inefficiencies in managing inventory, collecting receivables, or paying payables. An increasing trend in the cycle may potentially signify that the company is taking longer to sell inventory or collect payments, which could lead to cash flow challenges.

Overall, fluctuations in the cash conversion cycle of The Gap, Inc. over the periods analyzed provide insights into the company's working capital management efficiency and its ability to convert investments into cash inflows.